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Internal Capital Market Efficiency of Belgian Holding Companies

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Author Info
Axel, GAUTIER (CEREC, FacultŽs Universitaires Saint-Louis and CORE)
Malika, HAMADI (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

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Abstract

In this paper, we raise the following two questions : (1) do Belgian holding companies operate an internal capital market to transfer financial resources in between their subsidiaries ? And if yes, (2) is the internal capital market efficient ? To answer the first question, we check if the group cash flow is a determinant of the investmentÕs spending of group members. The answer is positive if the holdingÕs subsidiary is affilliated to a coordinate center and negative otherwise. To answer the second question, we evaluate if internal transfers are driven by efficiency. From our estimations, we cannot conclude that Belgian Holding companies have an efficient internal capital market.

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Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2004037.

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Date of creation: 01 Jan 2005
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Handle: RePEc:ctl:louvir:2004037

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Related research
Keywords: Investment; Holding; Internal capital market;

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G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Investment Policy

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References listed on IDEAS
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Cited by:
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  1. Ronald Anderson & Malika Hamadi, 2007. "Ownership, Control and Liquidity," Working Papers of CREFI-LSF (Centre of Research in Finance - Luxembourg School of Finance) 07-08, CREFI-LSF, University of Luxembourg. [Downloadable!]
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